THIS COMING WEEK
Here is the dollar index, the market dumb asses who know nothing talk about around water coolers at work. They spit out some stuff they read on the Internet about how the dollar is dead, China is taking over the world, blah blah blah, trying to sound smart. The best thing about the markets is that they resolve all the arguments themselves. Make no mistake about it, I feel like a dumb ass at times too when I make lousy trades. Ironically we have the perfect storm for a dollar decline in some ways. We have the worst President the country is likely to ever have, along with many other internal problems that could work to hurt the value of our currency. However, it is always a relative matter. In spite of all the mistakes Barry has made as well as those made by the other party, the US is still far and away the most powerful country in the world. It is always going to be this way. If you get caught up rooting against the US too much, you ignore history. People reference the fall of the Roman Empire as precedent for the fall of the US. For all I know that may be right, but one prior occurrence from that many years ago, is hardly enough to bet the farm on. I bet on the favorites not the long shots as I have discussed before. This is why overall, I expect the dollar to be pretty strong this year.
Keep in mind the Dollar Index and the Euro are very highly inversely correlated. If you think the dollar is going to get pummeled then by default means a huge rally in the EURO. Maybe that will happen, I don't know and neither does anyone else. My overall feeling on this is that the dollar is going to be strong this year net, and the EURO weak. However, we do at the moment have some things telling us we could be coming into moves down in the dollar and up in the EURO. These are fundamental setups not trades.. Those of you who watch Larry TV have to understand the difference. I have one friend who for the last few months always bashes Larry saying his broadcast called for moves that did not happen. When either Larry or I discuss setups, they are not predictions and they are not trades. We are pointing out conditions that in the past have led to moves in certain directions. Please keep this in mind. I also get occasional emails on this subject and I always respond the same way.
You don't just go into the market the next day in the direction of a fundamental setup. If you do that you will be wiped out that I can promise you. They are conditions that should be used as support for shorter term signals you get in whatever tools you use to enter and exit trades. If you look at the above DOLLAR INDEX chart, there are a few things to take note of.
First, my new tool has dipped into the sell zone. I consider this an early warning signal, it is not a sell signal just by itself. When markets are running like this one is and I have labeled a prior instance of the same thing, these signals can be very early. It is normal for the commercials to position themselves against trends, so you don't just fight them when you see this. We do also have open interest pretty high here, and as you can see it is not the big guys buying. This is generally bearish. We have the seasonal tendency for a rally to occur kicking in here as well. The trend in this market is up by the bands I use. If we look at the EURO, it is pretty much the opposite picture, with mostly bullish things and a strong down trend.
As a result, we don't have a one way street here with the fundamental measures. In these situations, I trade in both directions on the shorter time frames. I have support for a buy or a sell here. I am leaning to the long side because of my down bias in stocks right now, and the inverse relationship between stocks and the dollar. That is how I put all this together. It may be incorrect I am not always right. That is the way I am looking this week, down in stocks, up in the dollar. Also keep in mind that I may at times trade in the opposite direction of a setup if I get a short term signal that looks good.
I am still looking for signals in the same direction in the markets in have mentioned in the last two weeks in here. The Grains in particular seem to be very well setup for a decline, and Gold and Silver look bullish to me. I think the big down move in GOLD will happen when stocks drop sharply. I think they will move together. I don't think that moment is here yet.
The SHAW stock trade was exited at 27.09 on Friday for a gain of .42 per share. I had to leave early to play golf with my dad and was not going to be around for the close, so I took the small profit. By the rules the trade is still on and the exit is a close of 27.19 or less for Monday. For those who might criticize the fact that I did not follow the rules, I often don't. Trading is about making decisions and working your way through things. I am tracking these completely mechanically for the benefit of readers, I doubt I will ever trade them that way personally. If I ever off them via a pay service, I will have the rules the way I am showing them here, but it will always be up to individuals to use them the best way they see fit. I know from experience, no matter how I lay out the rules, subscribers never follow them correctly anyway. They will then blame me when they don't. That is how our world works. There must have been an amendment to the constitution making it law that people are not responsible for their own actions.
TAL and NFLX are new shorts that are in play for Monday in the stock world. I have not gone through the longs yet to see if there are any there. For the purposes of tracking these things live, we will just stick with these two.
A prediction, Tebow mania ends today.